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Consumers increasingly mixed on housing market?

July 2, 2018

The rate at which both mortgage rates and home prices continue to rise nationwide has been a big point of concern in the housing market, because experts reason that, at some point, would-be buyers will see the cost of purchasing a home surpass their buying power. And while that certainly hasn't happened yet, changing economic conditions may be putting some shoppers off the idea.

"Mortgage applications filed nationwide slipped 4.9%."

In the week ending June 22, the total number of mortgage applications filed nationwide slipped 4.9 percent on a seasonally adjusted basis, according to the latest Weekly Mortgage Applications Survey from the Mortgage Bankers Association. These changes came thanks to a 4 percent drop in refinancing requests being filed by current homeowners (who are continually priced out when rates rise) but also a 6 percent drop in purchase applications.

Interestingly, purchase applications were still up 1 percent on an annual basis despite the steep weekly decline, the report said.

A different trendIt's worth noting, however, mortgage rates have actually been declining, albeit only slightly, for some time now, according to the latest Primary Mortgage Market Survey from the government-sponsored mortgage-backing giant Freddie Mac. In the week ending June 28, rates slipped for the fourth time in five weeks, but still remain above where they were as recently as April, and certainly at this time last year.

For instance, the average 30-year fixed-rate mortgage carried an interest rate of 4.55 percent this week, down from 4.57 percent seven days prior but up from 3.88 percent annually, the report said. Likewise, 15-year FRMs didn't budge on a weekly basis but grew to 4.04 percent from 3.17 percent year-over-year.

"The rate at which both mortgage rates and home prices continue to rise nationwide has been a big point of concern in the housing market," said Sam Khater, the chief economist at Freddie Mac. "Some are undoubtedly feeling the affordability hit from swift price appreciation and mortgage rates that are still 67 basis points higher than this week a year ago. As highlighted in our June Forecast, the economy and housing market overall are on solid footing this summer, which should support continued strength in housing demand. Home price growth is still high, but is expected to moderate, and while sales activity has slowed, it's primarily because of stubbornly low supply."

A potential impedimentSeparate data from Freddie Mac, however, higher costs associated with buying a home - in the form of both rising mortgage rates and ever-growing home prices - is the single biggest hurdle when it comes to young people buying property. From 2004 (the market's peak) to 2016, the share of homeownership among adults under 35 fell about 8 percent, and while that number is likely growing more recently, issues that can keep young people from buying linger.

Higher housing costs were cited by 49 percent of shoppers as being the reason they don't own yet, as do higher rents that make it more difficult to save for a property in the first place, the report said. Likewise, issues related to student debt still linger for many would-be buyers as well.

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